Smart Sukuk Structure from Sharia Perspective and Financing Benefits: Proposed Application of Smart Sukuk through Blockchain Technology in Islamic Banks within Turkey

Abstract

Smart Sukuk structure is the new generation of Sukuk issuances structures. It uses Blockchain technology to allow more investors in both retail and corporate sectors to participate in Sukuk issuances. Through this technology, all financial institutions can issue their Sukuk. All types of documents and information related to the issuance of Sukuk are kept with the issuer's chains and the chains of the Central Registration Institution. Limited research was conducted on the transactions of smart Sukuk structures, such as Sukuk issuance model, traded Sukuk transactions and committed transactions market, from the Sharia compliance perspective and its financing benefits. This paper presents an in-depth study of the AAOIFI Standards, the decisions of Islamic Jurisprudence Academies and Sharia Boards, that related the Sukuk structures, applied in the Islamic bank of the paper's study society and the transactions of smart contracts from Sharia compliance perspective. On the other hand, this paper presents how to apply proposed smart Sukuk structures models that use Blockchain technology and smart contracts, within the largest Islamic bank in Turkey, in order to find out its financing benefits. The research findings indicate that from the Sharia perspective there are some issues in some applicable Sukuk models, such as the issue of capital guarantees. The use of Blockchain technology in smart Sukuk structures reflects several benefits on the financing markets, as it gives more capacity to access to more investors and markets, faster processing capability, transparency, invariance, and low transaction cost.

Keywords

• smart sukuk
• islamic banks
• blockchain
• shari'ah compliant
• financing benefits